WASHINGTON – President Barack Obama signed into law Friday a bill lowering the interest rate on Stafford subsidized student loans.
This fall’s interest rate for such loans will be:
3.9 percent for undergraduates,
5.4 percent for graduate students,
6.4 percent for PLUS loans, which can be taken out by graduate students or parents.
These interest rates will now be tied to the 10-year Treasury note, creating a fluctuating rate based on the economy with an added-on base rate.
The bill’s signing comes a month after last year’s student loan bill expired July 1, causing interest rates to double from 3.4 percent to 6.8 percent.
However, any students who withdrew loans during the temporary increase will receive the 3.9 percent rate because the measure is retroactive.
Interest rates on Stafford subsidized loans will be capped at 8.25 percent for undergraduates, 9.25 percent for graduate students and 10.5 percent for PLUS loans.
Congress struggled to pass legislation on this issue as the Senate remained divided among party lines for more than a month. Democrats wanted to extend last year’s 3.4 percent interest rate for another year while Republicans fought for the measure passed into law.
The House of Representatives kicked off a market-based approach to student-loan interest rates by passing legislation in May. However, the Senate amended it to current version passed into law, capping the rates and lowering the add-on rate of 2.05 percent.
Sen. Mark Udall, D-Colo., and Sen. Michael Bennet, D-Colo., voted in favor of the bill as did U.S. Rep. Scott Tipton, R-Cortez.
The bill will go into effect immediately, a few weeks before 11 million college students withdraw Stafford subsidized student loans for the school year.
